All iOS devices require to go through a process called Activation in order to start using the device.
On iOS 5 and newer, this is built into the Setup process that users go through by connecting to Wi-Fi or cellular data.
On iOS 4 and older though, the device will be in the "Activation screen" where the device will display an iTunes logo and USB cable, with the battery indicator at the top right to differentiate it from recovery mode.
Activation is typically done by iTunes or Finder, but it can also be done with a utility called ideviceactivation, which is identical to how iTunes activates devices.
To do activation in Legacy iOS Kit, just go to: Other Utilities -> Attempt Activation
This process requires a SIM card for iPhone 2G, 3G, 3GS, and 4. It can also be done without a valid SIM card by going through Hacktivation instead.